Congress Introduces Natural Disaster Tax Relief Package
By Carlie Christensen
House Expected to Vote This Week on 2018 Tax Extenders and Natural Disaster Tax Relief Package
On Tuesday, November 26, House Ways & Means Committee Chairman Kevin Brady (R-TX) introduced an end-of-year tax package, which includes a one-year extension (2018 only) of the Indian Employment Credit (IEC) and the Federal Empowerment Zone (FEZ) credit, in addition to employee retention credits for a number of natural disasters.
This is the first bill to address expired tax credits that Congress has introduced this year. It also includes a more expansive list of natural disasters than other disaster tax relief bills.
The House of Representatives is expected to vote to approve the package early this week. If it is able to garner bipartisan support, the Senate will have a higher chance of approving the bill before the end of 2018. Without bipartisan support, the Senate will likely make changes to the legislation, if Senate Republicans and Democrats can reach a consensus regarding their tax priorities.
Indian Employment Credit, Federal Empowerment Zones and Disaster Employee Retention Credits
The IEC and FEZ tax incentives expired on December 31, 2017. This bill would retroactively extend these credits for 2018 only. Unfortunately, both would expire again on December 31, 2018.
The IEC provides a 20% credit to employers for wages and healthcare expenses associated with employing certain members of an Indian tribe. The FEZ provides employment credits within designated empowerment zones.
In addition, the bill allows qualifying businesses conducting active trade or business in designated disaster zones to claim a retention tax credit for continuing to pay their employees during the time frame that the business was impacted by the disaster. Employers may seek a 40% credit for wages paid to employees (up to a maximum base of $6,000) if it was inoperable within specific time periods, depending on the disaster event. However, employers can not take the credit on the same wages used to calculate the WOTC program for an eligible employee for the same period.
Equifax is actively supporting this piece of legislation and will continue to closely monitor the status of the bill. Stay tuned for updates.
See a detailed summary of the bill’s employment tax credit provisions below and contact us to learn more.
H.R. 88 - The Retirement, Savings, and Other Tax Relief Act and Tax Payer First Act
Section 138 – Indian employment credit
Extended by one-year, from December 31, 2017 to December 31, 2018 (Internal Revenue Code Section 45A(f))
Section 143 – Extension of empowerment zone tax incentives
Extended by one-year, from December 31, 2017 to December 31, 2018 (Internal Revenue Code Section 1391(d)(1)(A)(i))
Employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. The amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000. (Internal Revenue Code Section 38)
Applies to employers conducting active trade or business in the following designated disaster zones and was inoperable during the following time periods:
Hurricane Florence – September 7, 2018 through January 1, 2019
Hurricane Michael – October 7, 2018 through January 1, 2019
Typhoon Mangkhut – September 10, 2018 through January 1, 2019
Typhoon Yutu – October 24, 2018 through January 1, 2019
Mendocino Wildfires – July 23, 2018 through September 19, 2018 (conducted business); September 19, 2018 through January 1, 2019 (inoperable)
Camp and Woolsey Wildfires – November 8, 2018 through November 30, 2018 (conducted business); November 8, 2018 through January 1, 2019 (inoperable)
Kilauea Volcanic Eruption and Earthquakes – May 3, 2018 through August 17, 2018 (conducted business); May 3, 2018 through January 1, 2019 (inoperable)
Hawaii Severe Storms, Flooding, Landslides and Mudslides – April 13, 2018 through January 1, 2019